News Corp. starts buy back

Conglom plans to purchase Fox shares

NEW YORK — News Corp. on Monday launched a multibillion-dollar stock offer to buy back the shares it doesn’t already own in Fox Entertainment, the subsid it spun off in 1998 to raise cash and offer investors a way to play the far-flung conglom’s U.S. entertainment assets.

News Corp. execs valued the offer at $5.86 billion.

But some investors questioned the terms of the transaction and several shareholders filed a lawsuit in Delaware Chancery Court calling the offer “wholly inadequate.” One Fox investor on a conference call Monday characterized the premium as “skinny.”

Transaction would call for shareholders of Fox Class A common stock to receive 1.90 shares of News Corp. Class A common stock for each share tendered. News Corp. said the offer reps a premium of about 7.4% to Fox stock’s closing price Friday. The exchange expires Feb. 7 but could be extended.

Rupert Murdoch’s News Corp. owns about 80% of Fox Entertainment, which houses the Fox broadcast network, television stations, Fox New Channel and other cable nets and 20th Century Fox movie studio. It also houses recently acquired DirecTV.

News Corp. has been toying with the idea of taking Fox private for months. Execs noted during the conference call that the conglom’s recent reincorporating in the U.S. from Australia made a separate listing particularly unnecessary. They said the operating benefits of buying Fox are minimal, since News Corp. has always controlled it. But merging Fox back into News Corp. would eliminate redundant public company expenses like audit and legal and will allow the parent company to allocate funds more freely between Fox and News Corp.’s other businesses.

Execs dismissed the question of whether the new structure would make it easier for News Corp. to cut deals using Fox assets. Such potential deals, possibly with John Malone’s Liberty Media, have been weighing on Wall Street ever since Liberty acquired a hefty voting stake in News Corp. Some fret that Malone may pressure Murdoch into pooling assets or doing some other transaction they may or may not like.

Speaking at a media conference Monday, Liberty CEO Robert Bennett once again sought to downplay investor jitters. “There have been a couple of conversations (with News Corp.) and may be more over time,” he said. But he stressed Liberty’s confidence in News Corp.’s management. “We are satisfied (with) the status quo and this will be a terrific investment for us over time.”

“I can’t point today to exactly why or what, but I believe that owning voting shares is generally better than owning non-voting shares,” he added.

News Corp. raised $2.8 billion when it took Fox public seven years ago, selling about 125 million shares. The shares started trading back then at about $25.

On Monday, shares of Fox rose 9.8% to $34.28.

Shares of News Corp. fell 2.08% to $17.85.